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TMI Blog1997 (12) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, the Tribunal is right in holding that the provisions of section 40(c) are not attracted ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the sum of Rs. 5,33,755 being contribution made by the assessee to the approved gratuity fund is an admissible deduction ?" The assessee is a company carrying on business in chits. During the course of assessment proceedings for the assessment year 1978-79, the assessee claimed deduction for a sum of Rs. 2,50,000 being the remuneration paid to be managerial staff of the holding company under an agreement dated May 1, 1973, entered into for the use of service of the managing director and four other officers of the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holding company. The Commissioner of Income-tax (Appeals), following an order of the Tribunal, Cochin Bench, in I. T. A. No 159/Coch. of 1979, dated April 10, 1981, rendered in the assessee's own case for the assessment year 1975-76, held that the Income-tax Officer was not justified in making disallowance of the remuneration paid to the managerial staff of the holding company and the disallowance made by the Income-tax Officer of a sum of Rs. 2,04,000 was deleted for the assessment year 1978-79. The Revenue carried the matter in appeal before the Income-tax Appellate Tribunal and the Appellate Tribunal following the earlier order of the Tribunal, Cochin Bench, rendered in the assessee's own case in I. T. A. No. 159/Coch. of 1979, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 40(c) read with section 37 of the Act would apply. In so far as the payment made towards approved gratuity fund is concerned, he submitted that the Tribunal was also not correct in holding that the amount contributed to the approved gratuity fund is an allowable deduction. Mr. Janarthana Raja, learned counsel for the assessee, supported the order of the Appellate Tribunal. We have carefully considered the rival submissions of learned counsel for the respective parties. We have noticed, the Appellate Tribunal, in the instant case, followed an earlier order of the Tribunal, Cochin Bench, in I. T. A. No. 159 (Coch.) of 1979, dated April 10, 1981, and as against that order of the Appellate Tribunal rendered in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was lifted and evasion of income-tax prevented by paying regard to the economic realities behind the legal facade. No such exceptional circumstances are found in this case. Hence, we are of the opinion that section 40(c) is not attracted on the facts of this case. The amount also has been considered as reasonable. In the circumstances of the case, we hold that section 40(c) read with sections 2(31) and 2(32) of the Act is not attracted." The factual situation prevailing in the assessment year 1978-79 is the same as the facts found by the Appellate Tribunal, in its earlier order which was the subject-matter of consideration by the Kerala High Court in the abovesaid decision. Since there is no difference in the facts, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 94, we hold that the Tribunal has come to a correct conclusion in holding that the provisions of section 40(c) of the Act are not attracted to the facts of the case. Accordingly, the first question is liable to be answered against the Revenue. In so far as the second question of law is concerned, the point involved in the question was the subject-matter of consideration before us in T. C. No. 1519 of 1986, (CIT v. Sudarsan Chits (India) Ltd. (No. 1) [ 1999] 239 ITR 170 (Mad)), and by a judgment of even date, we held that the contribution made by the assessee towards approved gratuity fund is an admissible deduction. Following our judgment in T. C. No. 1519 of 1986, (CIT v. Sudarsan Chits (India) Ltd. (No. 1) [1999] 239 ITR 170 (Mad)), o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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